Margaret Atwood once remarked that she could count on one hand the number of Canadian writers who earned an annual six-figure salary; and she was one of them. The writer's life is a hard one, a living rife with uncertainty and typically, penury.
Some write because it's a passion, a calling. It's art and to be a scribe is to be fulfilled, no matter the unpredictable pay and measly cheques.
Others, like Arthur Conan Doyle, an underemployed physician, wrote for money. Serialized fiction, like Doyle's Sherlock Holmes, was also good to Richmal Crompton for her Just William stories, to JK Rowling for the ridiculously popular Harry Potter, to RA Salvatore for his Forgotten Realms and Robert Jordon's Wheel of Time series, to Terry Pratchett's Discworld novels, and so on.
If a writer can create a character or a world that captures the imagination of the public and she can churn out a series based on that character/world, there can be gold in them thar hills.
James Frey, he of the fictional "non-fiction" A Million Little Pieces, has taken exploitation of writers to a new plane.
His project, Full Fathom Five, was inspired by the potential riches he saw in serial fiction like Harry Potter. Full Fathom Five is a sweatshop for young writers where Frey recruits those who desperately desire a book deal, has them churn out some pulp fiction, which could be sold to publishers and film studios for what might be a princely sum, and pays his writer-slaves $250 upfront (with $125 paid upon commencement of the book and $125 once the final version is delivered. Cha-Ching!) with the promise of royalties if the books sells.
Frey owns creative control of and copyright to all books produced. He also wields punitive power over his stable of scribes, of which there are now about 30, if a fed-up author decides to flee Frey's exploitative contract.
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Frey's project, particularly his evil, Faustian contract, has been described as "brutal." I can picture Full Fathom Five's workspace: a dank and miserable open factory floor, with grey, bedraggled writers hunched over desks, quills dipping in pots of ink and furious scribbling on sheets of foolscap. Frey, meanwhile, sits at the front of the factory, feet upon mahogany desk, chomping a cigar, waiting for one of his minions to pen the next Twilight.

Well, I think it is safe to assume that he only has control over books written while under his employ. So, based on that, it's much more than what most writers get paid to write a book which is nothing.
No, $250 is not much money. But, with the money, comes guidance and connections that Frey can provide.
I think most of the writers that work for him would gladly accept nothing, as the value of being a published writer is well worth the foregone revenues while they hone their craft and build their reputation.
If writers refused to work unless they got union wages, there wouldn't be too many books being written.
To KeyStone;
This isn't employment. It's piecework, and a particularly vile kind at that. Frey appears to be doing nothing more than making suggestions for rewrites. I shouldn't wonder if every publisher has a special slush pile for Frey's endentured writers' output.
As for the logic that writers would gladly accept nothing, you have assumed that they will be a published writer which is not the case. They are writers who have produced a manuscript for someone else to sell and profit from. Hardly a mentoring or apprenticeship situation.
This is exploitation, reprehensible, and a clear example of the difference between the legal and the ethical.